Cross-border Impact Assessment 2017

Dossier 6: Qualifying Foreign Taxpayer Obligation (“90% rule”)

Entire dossier

The Qualifying Foreign Taxpayer Obligation (“90% rule”): A Quantitative Ex-Ante Impact Assessment

Prof. dr. Maarten Vink

Johan van der Valk

dr. Marcel Schaper

Lea Smidt



The dossier analyses the population of non-resident workers in the Netherlands as of 1 December 2014 to estimate the potential cross-border impact of the qualifying foreign taxpayer obligation (“90% rule”) that took effect on 1 January 2015. The legislation establishes that non-resident taxpayers in the Netherlands may benefit from the same deductions and tax credits as resident taxpayers if they earn 90% of their global income in the Netherlands. It replaces the optional scheme considered incompatible with EU law by a ruling of the Court of Justice of the European Union (CJEU).[1]


90% rule

Under the optional scheme non-resident taxpayers could opt for the same tax treatment as resident taxpayers even if earning less than 90% of their global income in the Netherlands. Under the new scheme, non-resident workers risk forfeiting tax benefits, e.g. mortgage interest deductions for owner occupied dwellings, if they neither earn 90% of their world income in the Netherlands, nor have a sufficient taxable income in their country of residence. The CJEU has established that this legislation infringes on the principles of freedom of movement for workers (Art. 45 TFEU) and of establishment (Art. 49 TFEU) in the EU.[2] By providing a statistical overview of non-resident employees in the Netherlands one month before the 90% rule took effect, our ex-ante assessment provides a preliminary benchmark for a measure of the impact of the new tax regime. Future impact assessments can estimate the ex post effects of the legislation on the aforementioned principles of European integration against this benchmark.[3]


Affected employees

Overall, 131.2 thousand employees work but do not live in the Netherlands on 1 December 2014. Of this target group 89.1 thousand are men, 42.0 thousand are women. Furthermore, as most non-resident employees are between 25 and 45 (15.6%) the legislation potentially affects families with younger children. Dutch citizens represent the largest nationality within the population of non-resident workers in the Netherlands (43.4 thousand). They mostly live in Belgium (22.5 thousand) and Germany (16.1 thousand). Another third of non-residents are Polish nationals (42.6 thousand), of which most reside in Poland (41.3 thousand). Thus, Polish residents also constitute the biggest group of non-resident workers in the Netherlands followed by Belgian (38.4 thousand) and German residents (34.3 thousand).

German and Belgian citizens likely commute to their work place on a daily basis if they live in the border region. Most of them are full-time employees while Polish residents more often work part-time. A similar ratio applies for Polish nationals compared to all other nationalities. As Poland is not a Dutch border country, this may suggest a high rate of seasonal employment of Polish residents in the Netherlands. Generally, part-time workers less likely earn 90% of their global income in the Netherlands because they may have a source of income in another country to complement their Dutch salary.

Moreover, the 90% rule has a differential effect across work sectors. Across all nationalities, most non-resident workers are employed in the commercial service sector (65.2%). Yet, a sizable number of Dutch nationals work in the public and social services (68.6%) as well as the industrial manufacturing sector (38.6%). While the number of Polish nationals is highest in the commercial service sector they represent the major share of agricultural non-resident workers (81.1%).

Especially the border region is concerned by the impact of the 90% rule. The 14 COROP areas along the Dutch-German and Dutch-Belgian border employ the majority of non-resident workers (63.4%). Most of them are Belgian or German residents working in the Southern Netherlands. In particular, Zuid-Limburg employs most non-resident workers in absolute terms (16.7 thousand) and relative to the total employed population in the region (6.6%). Most of them live in Belgium (76%). The relative number of non-resident employees from Germany is highest in Noord-Limburg (3.4%).


In sum, the 90% rule likely reduces the positive effects of EU labour mobility, especially in the Dutch border COROPs. While some workers may be willing to move to the Netherlands, others might seek to change their employer to benefit from tax deductions in their country of residence. Besides counteracting the application of EU rights and principles, this has potentially adverse effects on investment and skills in the border regions.


[1] ECJ 18 March 2010, Case-440/08 (Gielen), NTFR 2010/795, Jur.2010. p. I-2323

[2] ECJ 09 February 2017, Case C-283/15 (X). See also H. Arts and J. Korving, De kwalificerende buitenlandse belastingplicht van art. 7.8 IB en het EU-recht. In: Grenseffectenrapportage 2016, Institute for Transnational and Euregional cross border cooperation and Mobility/ITEM, pp. 188-198.

[3] The data used in this impact assessment comes from Statistics Netherlands (CBS). We identify the target group of the 90% rule by linking processed data from the Municipal records data base (BRP) and the Polisadministratie. However, data limitations prevent a definite ex post assessment at this point in time. Firstly, it is only ex ante because tax returns are only complete up until 2014 and not for a sequence of years following the legislation. Secondly, the number of non-residents who claim tax deductions and earn less than 90% of their income in the Netherlands remains a preliminary estimate because tax data on non-residents is not processed at CBS. Polisadministratie data excludes self-employed people and information on whether people file a tax return.